Economic Development and International Leadership : A Comparison of Germany and Japan

This paper is the manuscript for my speech which I will deliver in Berlin in the morning of July 19, 2017 for the audience of German-Japan Business Association. My presentation is a part of our program of visiting Germany by a group of Shimada sonjuku who visit Munich Berlin and Frankfurt for the period of July 16 through 23 to meet various people and see various places to learn about current situation of Germany. This trip was arranged by our friend, Dr. Franz Waldenberger, Director of German Institute for Japanese Studies. I would like to thank specially for his effort.

Economic Development and International Leadership: A Comparison of Germany and Japan

Haruo Shimada

Chairperson of Board of Trustees

Tokyo Metropolitan University

July 19, 2017

German-Japan Business Association

Berlin, Germany

Ⅰ. Introduction

It is my great honor and pleasure to have this special opportunity to share views and enjoy frank discussion with distinguished members of Berlin business community interested particularly in Japanese economy and German-Japan relationship.

I visit Germany this time with some members of Shimada sonjuku, or literally translated Shimada village school, which organizes some 20 active and resourceful young business entrepreneurs for two year study program. We learn together histories, religions and cultures of major cultural zones of the world with a hope to equip themselves with relevant knowledge to become global business leaders. We make it a rule to visit a few countries in a year which are particularly interesting to understand the prospect of the world. We chose to visit Germany this time for this reason.

Taking advantage of this opportunity I would like to thank particularly Dr. Franz Waldenberger, Director, German Institute for Japanese Studies, for his earnest support and careful and comprehensive arrangement to make our trip possible.

Ⅱ. Historical Similarities and Differences

1. Historical similarities

Germany and Japan have many commonalities such as diligent people, industrial state, strong family ties and so on. To single out perhaps the most important is our common historical experience of fighting in WWII, completely defeated, but reconstructed their economies remarkably, and are now facing many complex challenges in international community.

2. Differences

(1) Defeat and reconstruction:

Germany:

Given this commonality, there are some important differences. After the defeat, Germany was governed directly by the four powers, the US, UK, France and Soviet Russia. And consequently, the country was sub-divided in accordance with the jurisdiction of these ruling powers. With a creep of the cold war, the division of the country between Western bloc with is governed by US, UK and France alliance, and Eastern bloc governed by Soviet Russia grew increasingly sharp and rigid. Disliking the Soviet way of control, many German citizens escaped from Eastern bloc to Western bloc through Berlin. However, in August 1961, a wall was built in Berlin which rigorously separates between the East and West making it impossible to escape from the East to West until the fall of the Berlin wall in November 1989.

Japan:

Japan surrendered by accepting Potsdam declaration, and luckily was able to reconstruct the country with the existence of Japanese government although it was entirely controlled by SCAP, General Douglas A. MacArthur. Since almost all the urban areas had been thoroughly destroyed by air raid, the economy was chaotic and suffered from acute inflation. The US government sent economic advisors to redesign and recover the economy. In order to suppress acute inflation, they forced the government to adopt balanced budget which drove the economy into serious depression. The economy eventually escaped from this pitfall thanks to a wind fall demand due to Korean war in 1950.

(2) Economic Recovery and Reconstruction:

Germany:

Under the incredibly difficult conditions, German(West) economy started remarkable recovery. There were several helpful reasons: there remained in many places workable industrial facilities, economic aid by Marshall plan, and diligent German workforce. In contrast, the recovery of the East bloc was much delayed largely because Soviet Russia’s merciless deprivation of remaining productive capacity which was sent to Soviet.

Japan:

Japan achieved remarkable industrial recovery from 1950s in the wake of Korean war. In addition to the boosting war demand, the 180 degree change of US strategy to deal with Japan from a possible enemy to an important ally in the face of rapidly growing cold war confrontation with the Soviet Russia. With the strong support and aid, Japan developed rapidly industrial capacity. By the end of 1950s, Japan was equipped with the most advanced productive facilities in basic industries such as steel and shipbuilding. On this basis, Japan exhibited two decades of rapid economic growth which attracted international attention.

Ⅲ. Postwar Economic Development

1. Remarkable development of Germany and its problem

(1) US pressure on exchange rate

In 1960s West Germany became a growth center of Europe. Powerful manufacturing companies led vigorous development of German economy. Disturbed by increasing trade and fiscal deficits, the US forcefully demanded Germany and Japan in mid-1980s to raise exchange rate. Unlike Japan, Germany kept its policy stance solidly and avoided erratic confusion.

(2) Re-unification of Germany and the birth of EU

In 1989, dramatic mass movement took place in Eastern Europe to criticize the pressive governments and go beyond borders. That wave reached East Germany in November and people broken the Berlin wall. Taking advantage of this epochal change of world history, Chancellor Helmut JM Kohl dared to propose a long desired plan of re-unification of Germany. The reunification was admitted by European countries, most notably France, together with a mega-transformation of Europe, namely, the formation of EU. The reunified Germany pledged that it will belong to EU and contribute to the development of EU.

(3) Schroeder reform: Agenda 2010

While Germany has grown to be a major economic power, it began to suffer in 1990s a social symptom of what may be called “German disease.” Workers enjoy high income, long vacation, good pensions and well protected employment security, German economy began to suffer from rigid labor market and high labor cost. Germany was often called “sick man” of Europe. Chancellor Gerhard Schroeder who succeeded office from Chancellor Kohl challenged this deep-rooted structural defect courageously. His challenge is known as “Agenda 2010.” He altered dramatically rigid rules of employment to flexible and efficient system, for example, shortened eligible period to receive unemployment benefits, a new scheme to reduce pension payments by raising eligible age to receive benefits and fixed term employment etc. These reforms had been proposed in the past by CDU and business friendly political leaders but not realized. It is amazing that Mr. Schroeder, the head of SPD, the social democratic party, dared to propose such policy package which would strengthen business competitiveness by making labor cost burden more flexible, and realized such reforms. While Mr.Schroeder was unpopular because of such reforms, German economy revived thanks to such flexible system of labor market and welfare payment.

2. Remarkable development of Japan and the lost decades

(1) Industrial development strategies of the government and business

The postwar rapid economic growth, which was admired as “Japan’s economic miracle” has been promoted by industrial development strategies of the government as well as of businesses. The government constructed a hierarchical structure of financial system by which the scarce financial resources are effectively mobilized to export oriented industries, and an industrial structure which constitutes an effective input-output structure to by combining basic input industries to those of final outputs, thereby empowering export competitiveness.

Businesses developed intra-company systems of training, career development, and quality control. While they learned QC from the US, Japanese companies developed QC further by creating quality control circles utilizing the merit of team work at the workshop. Large firms developed multi-tier supply chains organizing small and medium sized companies. All this helped Japanese industries develop export competitiveness.

(2) US pressure and the Plaza accord

Faced with increasing competitive pressure from trading partners particularly of Germany and Japan, the US government represented by Treasurer Mr.James Baker urged those countries to raise exchange rates. They somehow agreed to the US demand in the form of the Plaza accord in 1985. In the wake of the accord, Mr.Baker further requested Germany and Japan to expand their domestic demand to reduce their trade surplus to the US. Germany responded to it following its basic policy stance. Japan swallowed the US demand. However, worried about the depressive effect on its export revenue by higher exchange rate, Japanese government adopted drastic expansionary policy by both fiscal and financial means.

(3) The bubble and the lost two decades

Since Japan adopted a much delayed policy to dump the bubble which had emerged by the preceding expansionary policy, Japanese economy started to suffer a long stagnation, which later has been called as the lost two decades which lasted until Abe administration launched “Abenomics” from 2013.

Ⅳ. Current Economic Performance: Germany and Japan

1. Germany:

(1) Remarkable growth of German economy

German economy has been enjoying a powerful growth recently, particularly since around 2010. Germany is currently seen as Europe’s power center. While the economic policies of Ms.Angela Merkel’s CDU government is certainly appreciated for the success, much of the success should also be credited to the courageous and thorough reform conducted by Chancellor Gerhard Schroeder. By the name of his reform, “Agenda 2010,” Mr.Schroeder meant that the effects of the reform would be real by 2010. Thanks to his drastic reform to increase labor market and welfare flexibility, German economy revived its vigor since around 2010, 5 year after Mr.Schroeder’s stepping down from the office.

(2) Advantages of expanded EU and joining EURO economy

Looking more broadly and with a longer perspective, the formation of EU and its development to include many central and eastern European countries as its members, and constructing and joining the Euro zone economy contributed importantly to facilitate powerful development of German economy. By utilizing relatively low wage members of the expanded EU as Germany’s supportive production basis, and taking advantage of the common currency EURO which should be much lower than “would be Mark,”German economy secured strategic advantages for remarkable development even with the heavy economic burden of reunification of the country. Noteworthy is that these great strategies were adopted and carefully promoted by the courageous and sensible political leadership of Germany.

(3) Two speed economy and widening differentials.

Recent performance of German economy is outstanding. Growth hit a five year high in 2016. Exports are flourishing which resulted in a biggest trade surplus in the postwar era. Unemployment is lowest since reunification. Chancellor Angela Merkel described the situation saying, “you have never lived as good.” This is, however, a shining aspect of booming sectors of the economy. At the other end, low wage workers are increasing significantly who have only sub-standard employment conditions. Great influx of refugees and immigrants since particularly from 2014 largely from middle east amplify worries, anxieties or even fears of less protected workers in the society, which result in instability and disintegration of the society possibly having important implications for politics of Germany.

2. Japan: Abenomics and its performance

(1) Attempt to get rid of deflationary economy

Having been annoyed by the prolonged deflation without any substantive growth for more than two decades, the new administration led by Mr.Shinzo Abe was organized toward the end to 2012. The principal objective of the new cabinet was to get rid of chronic deflation. To get out of the spell of deflation and to initiate substantive growth of the economy, Abe administration launched a new policy package which later became known as “Abenomics.”

(2) Launch of Abenomics: three arrows

Abenomics consists of three arrows: (1) arrow of monetary policy, (2) arrow of fiscal policy and (3) arrow of growth strategy. These arrows have been launched one after another successively.

(3) Mixed success of the first arrow: monetary policy

The gist of the first arrow, the monetary policy, has been that BoJ increases the base money as much as 130 trillion yen within 2 years so that the stock of base money would increase to 270 trillion. With this “extra-dimensional”easing, BoJ governor Mr.Haruhiko Kuroda promised to increase prices by 2 percent within 2 years. Incidentally, the stock was planned to increase up to 350 trillion in the subsequent year, and is now expected to reach to 500 trillion, just as much as the size of GDP.

Expecting a huge increase of base money, the yen devalued by 20% in a few months, which in turn drove up stock prices by 80% within half a year. Namely, stock prices increased from 8000 yen in December 2012 to 15000yen in May 2013, which has increased less rapidly to reach the current level of 20000 yen. Thanks to a large increase of stock prices, corporate profits increased sizably which changed the business climate visibly. In this respect, the first arrow can be evaluated as an appreciable success. On the other hand, the genuine objective of this monetary policy, namely by increasing prices by 2 percent alter price expectations of people from deflationary to inflationary was not achieved as expected. Except for the first half a year, price increases have been negligible or stagnant until recently. While prices began increasing only modestly recently, its pace is far from what was expected by the “extra-dimensional” easing. Thus, the first arrow as a whole may not be evaluated as “success.”

(4) Active fiscal policy: the second arrow.

Abe administration declared to adopt active fiscal policy, namely, the government does not hesitate to resort to large spending whenever necessary. In addition to unprecedented large amount of regular annual budget, the government also injected extra-ordinary supplementary budgets almost once a year, for example, to help reconstruct devastated northern region by earthquake or to offset the negative reaction in the wake of an increase of consumption tax etc. Although such active fiscal spending has been useful to prevent the economy from down swing, it made the government difficult to restore fiscal balance by 2020, the international commitment. Thus, the second arrow may not be evaluated positively.

(5) Growth strategy by structural reform, the third arrow.

The most important of Abenomics is growth strategy because Abenomics after all aims at achieving steady growth of the economy in the long-run. Abe administration has been issuing a package of growth strategy every year since 2013. The 2013 package was a set of largely wishful ideas. The 2014 package, in contrast, focussed seriously on many critical issues of structural reform such as agriculture and labor practices. However, the reform met strenuous resistance so that unable to reach the core of the issues. The 2015 package was discouraging because it is abstract and not substantive for some reason.

May it be the result of this or not, the overall performance of the economy has been rather disappointing: growth has been minimal and real wages have been declining since shortly after the onset of Abe administration until very recently. Growth strategy of Abenomics, therefore, may not be viewed as success.

(6) The second stage of Abenomics: inclusive growth for all

Since from the end of 2015, Abe administration began to advocate a second stage of three arrows under the new umbrella slogan of “100 million all active strategy.” The new first arrow is strong economy which attains 600 trillion yen GDP by 2020. The second arrow is a hopeful society by which much more young mothers can work while leaving their kids at nursery. The third arrow is a secured society where the aged can work more with greater care services for their helpless old family members. All this means is to enrich social infra-structure to help increase labor supplies in order to increase the growth potential of the economy, which has been dwarfed by the declining trend of population. It may be too early to judge success or failure of this new strategy.

(7) Labor shortage but sluggish wage increases.

The growth performance of Japanese economy has been improved modestly since about a year ago in a conducive environment of global economy. The annual average grew to low 1%, which is considerably higher than the estimated growth potential. The labor market is extremely tight. Strangely, however, wage increases have been incredibly sluggish, perhaps reflecting increasingly polarized labor market structure with full-time high payed workers vs. increasing proportion of part-time and low wage earners.

(8) Mushrooming government debt and possible fatal bankruptcy.

A serious risk is sneaking into Japanese economy in a medium term. It is the issue of mushrooming government debt and a risk of possible fatal bankruptcy of the economy as its consequence. Currently, the accumulated government debt is 240% of GDP, the ratio much worse than the worst EU member such as Greece. The aggregate net financial assets of households has ceased to increase while the total government debt has been increasing. Within 10 to 12 years, the government debt will be greater than the aggregate household net financial assets.

Such an economy is very vulnerable to any external shocks which trigger catastrophe. Once triggered, bond prices fall down, interest rates jump up, which makes the government difficult to organize budget, difficult for business to borrow and invest, leading to catastrophe of the economy. The government debt has been mushrooming due largely to rapid increase of social security expenditures since mid-1990s. The most effective way to minimize the catastrophic risk is to decrease the social costs of aging. Abe administration is timid to address itself forthrightly to this serious issue because it seems to recognize itself as very susceptible and vulnerable to the demand of aged voters like many other countries. We need to learn from the wisdom of German courageous Chancellor Gerhart Schroeder.

Ⅴ. International Leadership: Issues and Challenges

1. Can Germany lead European integration?

(1) Greece:

Germany faces many challenges in international relations. Debt crisis of Greece has been a headache for Eurozone for the last few years and still is. Germany has worked hard to facilitate financial arrangement with other member countries, ECB and IMF to lessen consequent damages to financial organizations, but the fundamental debt problem of Greece still remains serious. The problem potentially can develop to collapse of Euro zone. The new French president, Mr. Emmanuel Macron’s proposal for reforming Euro system addresses on this issue. The world is watching how Chancellor Angela Merkel reacts to his proposal, and offers her own positive plan for the zone.

(2) Brexit:

Brexit is another serious challenge. Prime Minister ○May declared “hard Brexit,” but at the same time requires Ms.Merkel and other EU leaders to provide special treatment to UK considering its unique importance to the rest of EU. Many, many questions are yet to be negotiated and resolved including the issue of break away payment. Since the way Brexit is treated by EU and its economic consequences are the matter of serious concern for the global community, here again the judgement and leadership of Mr.Merkel is keenly watched.

(3) Eurosceptism:

Not only UK, but also in many other EU countries such as Austria, Poland, Italy, Netherlands, Hungary, France and even Germany, Eurosceptic and nationalistic political parties and social movements have aroused rapidly partly reflecting popular resentment and fear against dramatic increase of refugee immigration and terrorism. This is a serious challenge against the basic motives for integration and cohesion of EU itself. The role of Germany, which has founded and defended EU working with France is watched seriously by pro-EU countries and people in international community.

(4) Trump:

In addition, Mr. Donald Trump has been posing problems against Germany and EU. He denounces Germany for imposing intolerable trade deficit to the US and paying much less than it should to contribute to NATO. Without knowing the history and understanding the roles of EU for global economic development and security, he dismisses its importance. Perhaps, disgusted with his outrageous attitude and ultra self-centered assertions at G7 Summit held in Taormina, Sicily, Ms. Merkel said a few days afterwards in a beer tent in Munich that “the times we can fully count on others are over.” “Europeans must really take our destiny into our own hands.” This statement called forth broad repercussions in international community.

(5) Leadership for European integration:

The critical question is whether Germany can and will take leadership in Europe. Whether it can take leadership, the answer is obviously yes. Germany is certainly capable both economically and politically, leadership in Europe. Whether it is willing to take leadership is another question. Historically, Germany has been very cautious on this question for various reasons, particularly, of historical liability of WWII. Under this constraint, however, Germany has worked well to integrate European community working patiently with other partners such as France. However, given the current extra-ordinary happenings to alter political alignment of the world, perhaps, it may be time for Germany to think more positively to take leadership, recognizing that it will require Germany to bear due burdens as a European and necessarily a global leader.

2. Can Japan lead regional cooperation?

(1) Trump, North Korea, China, South Korea

Mr. Trump kept criticizing during the presidential campaign that Japan is free-riding on security arrangement with the US saying that if Japan does not pay enough, the US would withdraw its troop from Japan. He also declared that the US will pull out of TPP(Trans Pacific Partnership) on the first day in his office. Mr. Trump’s accusation against Japan’s free-riding was groundless because Japan pays 73%, the highest among US allies, of staying cost of US military on Japan’s territory. General James Mattis, Defense secretary, quickly corrected the wrong image faked by Mr.Trump when he visited Japan as early as in February. General Mattie even praised Japan’s burden sharing as “the model” for other allies.

(2) TPP:

On the question of TPP, Mr.Trump ordered to pull out on his first day in the office. He did it inspite of the fact that it was his predecessor, president Barack, who solicited Japan to join. Japan now is seeking to start TPP working with 10 other countries without the US. Instead of TPP, the US wishes to have a bilateral trade agreement with Japan. Since TPP is the most advanced agreement of trade rules encompassing not only trade of goods but also a wide range of items including services, investments, government interference and intellectual property rights. The content of Japan-US bilateral agreement will in large part have to depend upon TPP agreements.

(3) North Korea problem:

Continuous and escalated experiments of long-range missiles and nuclear weapons by North Korea led by Kim Jon-Un began to give substantive threats to the US. Mr.Trump reacts with stern will not hesitating to resort to military means to denuclearize North Korea. After his summit talk with Xi Jinping, President of China, US requires China to put pressure against North Korea to refrain from such dangerous and provocative actions. In return, Mr.Trump dropped all accusations he had been directing loudly against China, as a “deal.” Some argue that pre-emptive attack could be effective to make North Korea powerless. This argument is extremely reckless and unrealistic because North Korea would certainly destroy Seoul, Tokyo and US base in Okinawa quickly before they are fatally attacked. What is needed is close cooperation of China, US, Japan and South Korea to persuade North Korea. However, North Korea so far has shown no sign to listen to such voices, and contrary kept developing catastrophic weaponry earnestly. At the end of the day, North Korea may well be equipped with the most advanced and powerful destructive weapons. To protect from such threats, countries in this region including Japan may have to arm themselves with nuclear weapons.

(4) China :

While China and Japan are closely tied together in trade and investment, political relations have rarely been close. In recent years, particularly after the incident of Senkaku islands, the relationship has been tense and often hostile. China has been accusingly Japan more fundamentally as having wrong interpretation and consciousness of history. Their criticism has a certain elements of truth, although their propaganda and education often exaggerate historical incident too much. More regrettable, in my judgement, is that Japan has not educated its public the basic facts of the relationship between Japan and China and other Asian countries during the war ridden period of early half of the 20th century. Without sufficient education of modern history of this era, we could not cultivate reasonable mutual relations among neighbors.

(4) South Korea

Korea has been continuously hostile and antagonistic against Japan throughout the postwar era except a few cooperative instances at the level of government and business. With newly elected president, Mr. Moon Jae-in, an alleged Japan critique, the relationship will be unfortunately more hostile.

This makes a sharp and curious contrast with German relations with Israel and some European countries. Japan has annexed Korea for about half a century after Japan-Russia war. With this experience, Korea hated Japan even since and and has kept been accused intolerably as exemplified by the case of “comfort women.” In contrast, Nazis killed more than 6 million helpless Jews in Europe and destructed and destroyed many parts of neighboring countries during WWII, but Germany has successfully cultivated mutually understandable relations with them. Japan may well need to learn wisdom from Germany to handle this issue.

(5) Regional leadership issue:

The problem and challenge Japan is faced on this question is quite common with Germany. Because of historical liability of wars, Japan has been very cautious about the regional leadership. While Japan has much industrial, technological, educational, cultural capabilities to contribute to the region, Japan is severely limited politically. So far, Japan has earnestly contributed in the form of official development aid using its capability, but refrained from any political leadership.

The Japan-US defense alliance, which Japan has been totally reliant for more than 60 years since the beginning of the cold war, adds another factor of dis-trust from countries like China and its regional allies. Japan is often accused for not clarifying war responsibility. Unlike the case of Germany, which was led by Adolf Hitler to wage the war, Japan was crowned by Emperor Hirohito who officially headed the country but has had very limited leadership so that the issue of war responsibility cannot be clarified as evidently as in the case of Germany. Besides, it was General Douglas MacArthur, the SCAP, who protected the emperor system as an instrument to administer his occupation, which makes it difficult to clarify the issue of war responsibility.

Ⅵ. Lessons and Mutual Learning

1. Lessons for Germany

Let me point to some lessons for Germany in the current and foreseeable future which emerge in my mind by comparing experiences of the Germany and Japan.

(1) Leadership to strengthen EU integration and stabilize EURO zone

Given various events which took place in Europe recently such as fiscal crisis in Greece, Brexit, drastic influx of refugees and immigrants from Middle East, uprising of nationalistic political parties and movements in many European countries, and also antagonistic attitude of president Trump against EU, EU seems to be suffering from instability and possibility of disintegration. It seems that it is primarily Germany which can and should take leadership to work together with other European countries to deepen mutual understanding and cooperation for the direction of strengthening European integration.

Of many tasks and challenges which Germany and other cooperative European countries are faced to work for this direction, I would like to point to the problems of Greece and Brexit. Problem of Greece seems to be more of fiscal than financial. Although the problem was created largely by the lack of fiscal discipline of Greece, it seems to be meaningful and useful for lending side as led by Germany gives some fiscal leeway such as lessening Greece fiscal burden for a certain limited period so that they can reform their system which they have been living with for a long time thanking the tentative rescue of the lending side led by Germany.

Brexit is needless to say the problem which UK is fully responsible. It is hard for outsiders like us, though, to understand where UK is heading at by sticking to the principle of hard Brexit as Ms.Theresa May advocates and also claiming to create an entirely different set of relations with other countries and regions including EU. UK seems to be trapped in an unfortunate confusion. We hope EU led by Germany and UK facilitate some new format to promote discussion with more open and mutually deeper understanding to find a constructive breakthrough.

(2) Construct fiscal federation or Euro bond.

It is recognized by many experts that Euro zone is structured in a hampered way, meaning that the economic zone with integrated single currency but without integrated fiscal relations. Given this hampered structure, it is basically unavoidable that the system cannot have self-reinforcing momentum to keep strengthening the integration of the system as in a single country or a federal system.

The proposal of new French president M. Emanuel Macron is well taken to find a fresh breakthrough to redesign the precious system of Euro zone to foster self-reinforcing momentum to keep integrating the system. Currently, M.Macron is reportedly suggesting to create a new Euro bond or design a quasi federal system. Germany has a unique and historical role to work together with France to design and construct a more robust Euro system for Euro members as well as the rest of the world.

2. Lessons for Japan

(1) Learn German fiscal discipline

Japan is suffering from by far the largest fiscal debt relative to major economies in the world. The outstanding government fiscal debt is as much as 230% of GDP, which is much higher than that of Greece.

In contrast, Germany has been reducing fiscal debt remarkably in recent years. From 2009 to 2014, Germany has successfully reduced federal fiscal debt as much as 96%. Germany is steadily improving its fiscal balance to satisfy Maastricht agreement, namely, confining the debt ratio to GDP less than 60%, the only country in EU.

Extra-ordinarily large debt of Japanese government may well suffer from a fatal fiscal collapse in the sense of drastic reduction of JGB prices and hence abrupt sharp increase of interest rates which makes it difficult for the government to organize annual budget and for businesses to finance themselves. Given the ever increasing abnormal debt burden, the fiscal condition is vulnerable to any major shocks to trigger the collapse of the economy.

Germany has attained this remarkable improvement in its fiscal balance by successfully increasing its economic growth rate in recent years which increased tax revenues in spite that tax rates themselves for businesses and individuals have been reduced. Germany achieved such improvements during the last decade by committing firmly to the fiscal discipline by even stipulating in its Basic Law to prohibit public borrowing greater than 0.35% of GDP. Japan needs to learn much from the wisdom and the determination to restore and maintain healthy fiscal balance of the country.

(2) Learn from Schroeder reform: Agenda 2010

Although Schroeder reform seems to be not very popular in the current German society where people are getting increasingly nervous about increases of low wage workers and widening income differentials among social strata, it is undeniable that his reform has been a prime force to change the rigid social structure of Germany and gave economic flexibility for German businesses to regain their vigor and competitiveness.

Indeed, this is the type of structural reform which Japan badly needs to promote. Prime minister Shinzo Abe has been advocating to promote structural change as a means to materialize the growth strategy of “Abenomics.” However, labor reform to increase flexibility of payment and employment has not attained substantive progress, and Abe government has failed to reform public pension system to reduce the fiscal burden by means of, say, increasing the eligible age to receive benefits which Chancellor Schroeder forcefully attained. Japan needs to learn from Germany the wisdom, courage and the determination to execute necessary reforms.

(3) Learn from German education of history of wars with neighbors.

Since 1939 to 1945, Germany led by the Nazis invaded many neighboring European countries, destructed the economy and society and killed many people. German massacre of more than 6 million Jews is the most dreadful and shameful deed which should be remembered eternally in human history as a lesson not to ever be repeated again.

After the war, German government and schools kept teaching young people of this sad experience. German attitude to share historical facts open with both German and other peoples acquired some understanding among the countries and peoples who were victimized by the Nazis aggression. With this effort, Germany somehow secured understanding by European partners and even Israel to construct new cooperative relationship such as EU and Euro zone.

Compared with such German experience, Japan has not successfully gained good understanding from some neighboring countries as China and Korea. They keep criticizing that Japan has not learned from the history, and has not apologized the sin Japan has committed during the war. When it comes to the question of war responsibility, German and Japanese experiences can not be compared easily. It is because Adolf Hitler and Japanese Emperor are totally incomparable even though they are formally top leaders. Hitler is a cruel and greedy dictator who obviously and substantively ordered his military to invade and destroy victimized countries. Emperor is a highly respected holly leader of the nation, and his life and rein has been saved and protected by the supreme commander of allied forces himself, General Douglas MacArther.

However different the question of war responsibility of the top leader of Germany and Japan, an undeniable fact is that Japan has not taught well to the people about Japan’s wars against other countries after the war even until today. In contrast, in China and Korea, aggressions and destructions by Japanese military during the war are in many cases are taught in schools and broadcasted by media broadly and persistently in much exaggerated and distorted ways.

Although there have been ample research results compiled by serious Japanese scholars and experts on facts of war, very little of such knowledge and findings is shared by the public because of absence of serious education in the postwar era. This non symmetry is a pity. Japan needs to learn from Germany at least to educate and keep educating the public about the facts of wars in Japanese contemporary history particularly with neighboring countries.